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Sunday, April 17, 2011

Flagstar Bancorp Inc. (NYSE: FBC) Q2 2011 Price Target

Recent price: 1.33$

P/E Ratio: -

3 Months Target Price: 1.90$

Company Description

According to Reuters, Flagstar Bancorp, Inc. is a savings and loan holding company. The Company’s business is primarily conducted through its principal subsidiary, Flagstar Bank, FSB , a federally chartered stock savings bank. As of December 31, 2009, the Bank operated 165 banking centers (of which 30 were located in retail stores), including 114 located in Michigan, 24 located in Indiana and 27 located in Georgia. Through its banking centers, the Bank gathers deposits, and offers a line of consumer and commercial financial products and services to individuals and to small and middle market businesses. It also gathers deposits on a nationwide basis through its Website, FlagstarDirect.com, and provides deposit and cash management services to governmental units on a relationship basis throughout its markets. The Company’s business consists of two operating segments: banking and home lending. Its banking operation offers a line of consumer and commercial financial products and services to individuals. Its home lending operation originates, acquires, sells and services mortgage loans on one- to four-family residences.

Confidence Margins

Strong resistance $2.75 (+107%)

Light resistance $1.90 (+43%)

Light support $1.16 (-13%)

Strong support $1.13 (-15%)

Recommendation

A massively dilutive stock offering sent the shares of Flagstar Bancorp Inc. down more than 50%. It seems however that investors have overreacted to the total level of dilution and this provides potential investors with a way to take advantage of the profit potential left in this stock.

Entry strategy

For the cautious investor:

Buy the stock for 1.50$ or less. It is highly recommended to keep the position on check as there is great volatility associated with it.

For the risk-taking trader:

As the company does not have any options contracts outstanding, a good way to increase the profit potential of this trade would be to increase the leverage associated with it.

Exit Strategy

For the cautious investor:

Sell when the stock reaches 1.90$, or keep it until 2.50$ if you are more bullish in your own analysis.

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Disclaimer

I am not a licensed investment advisor, so please consult with an investment professional before you invest your money. This site is for educational use only - any opinion here should not be treated as an investment advice. We are not liable for any losses suffered by any party because of recommendations published on this blog. Past performance is not a guarantee of future performance. Unless your investments are FDIC insured, they may decline in value.